Crypto Downtrends

Why do we invest?

The main aim of investing is to potentially increase the amount of money you have. One of the most common proverbs when it comes to investing is to “Buy Low, Sell High”. This is one of the main keys to become a successful investor which seems easy but, this idea is much more complicated.

Downtrend

Price drops can be frightening for those who purchased their cryptocurrency when it was at its peak. After all, the money where you invested in is no longer worth what it used to be. In short, crypto downtrend can be defined as the overall declining price of a coin. A downward pattern on the price chart is created by lower lows and lower highs.

There are two types of price waves that make up downtrends: impulse and correction. An impulse wave is a larger wave that is characterised by a substantial price decrease. It is not unusual for the price to increase slightly after you note this significant price drop which is the consequence of a corrective wave. Since an impulse wave is greater than a corrective wave, which results in the price of the coin to be lower than it was before you began.

Opportunity

Crypto downtrends often represent major trading opportunities. The most evident of which is the ability to purchase cryptocurrency at a lower price than ever before. When the price of cryptocurrency starts to fall, many people become panicked at the prospect of losing money and sell their crypto which allows to buy low as supply increases and demand decreases.

Short-selling strategies can also be used to trade inside these crypto downtrends. If you have been keeping an eye on the cryptocurrency market, you may be able to predict which waves are on their way (Impulse or correction). This gives you an opportunity to trade during a corrective wave. You may decide to short-sell your coins in the hopes of catching a larger impulse wave after a corrective wave.

Strategy

The best strategy to mitigate the risk is putting the eggs in a few different baskets. This means your cryptocurrency should be part of a well-diversified portfolio of non-crypto assets. Any losses you suffer in this approach will be offset by the rest of your portfolio.

HODL

HODL is one of the most frequently used slang terms in the Bitcoin community. This means when things take a turn for the worse, hold on for dear life. The belief is that by doing so, the high prices will be restored. When you are tracking your progress, you might get a little worried if you see consistent declines. It might make you guess and second guess your investment choices. Do not let this be the reason you start making irrational trades because you are afraid you have made a mistake and stick to your well-researched decisions!

It is natural for us to be scared when the price of our cryptocurrency drops, and we accept our losses. This is particularly true when other coins are doing well. However, do not let this be the cause of your defeat. You have not lost everything yet, after all! Although things will seem to be hopeless, you can only lose money if you proceed.